MPs fail in bid to create exemptions from employer NICs increase

Four of these were pressed to a vote but were defeated (details below), with the House going on to give the Bill a third reading by 354 votes to 202.

The Bill and related documents can be read here. The debate can be read in full here.

Debate

The debate was opened by Liberal Democrat Pippa Heylings who moved an amendment seeking to exempt pharmacists and all providers of health and social care from the increase in employers' national insurance contributions (NICs) in the Bill. She warned that the NHS cannot be fixed by “driving its primary care providers into the ground”.

The Shadow Financial Secretary, Gareth Davies (Con), criticised the Bill, saying that: “Whether businesses freeze or cut jobs, or, as the Chartered Institute of Taxation has warned, shift employees to a self-employed basis, or, even worse, offshore workers to overseas destinations, the potential impact on employment should absolutely worry us all”. He noted Office of Budget Responsibility (OBR) estimates that, by 2027, 76% of the tax would be passed on to working people through lower wages and higher prices.

Like the Lib Dems, the Conservatives also proposed amendments seeking to protect certain groups from the Bill’s effects. “Whether healthcare, childcare or the charity sector, organisation after organisation has warned ministers that this tax rise will impact the services they provide,” said Davies. “That may not have been intended, but the government have yet to act. That is why we have tabled amendments 13 to 15 and 16 to 18, which seek to protect certain key sectors from both parts of this tax in Great Britain and Northern Ireland respectively.”

Gareth Snell (Lab) highlighted that Davies voted for the health and social care levy, which was “an increase of greater proportion on both employees and employers,” yet he is against this increase. The shadow minister responded that the Conservatives had had to make a ‘difficult’ decision in the face of a global pandemic, considering Labour's decision a “political choice” as “there is no global pandemic today”.

Labour backbenchers including Joe Morris, Chris Curtis and Dan Tomlinson welcomed the Bill, arguing that the measure is necessary to repair the public finances. Morris welcomed that extra money raised would be invested into the NHS. Curtis blamed the Conservatives for leaving Labour a ‘£22 billion pound black hole’. Tomlinson believed that the changes that put forward in the Budget, including on national insurance, will pave the way for higher growth and higher living standards.

Stella Creasy (Lab) put forward new clause 4 which proposed a review of the impact of the NICs increase on childcare services. She claimed that: “We are in the middle of the biggest expansion of childcare this country has ever seen”. She argued that under the previous government, some parents were paying more for childcare than for their rent or their mortgage.

Shockat Adam (Independent) described his amendment 7 which calls for GP surgeries, pharmacists, “the often forgotten profession of optometrists” (he is one) and other health professionals to be excluded from the NICs increase, along with charities with fewer than 50 employees.

Labour MP Yuan Yang said the many amendments seeking carve outs from the Bill would add to tax complexity. “The way to reform a tax system is not to argue for various exemptions, reliefs and get-out clauses for different subsectors, but to have a consistent approach to collecting tax applied across the whole economy,” she suggested.

Gareth Snell said there was a need for a ‘broader’ discussion about how social care should be funded and whether “we consider them to be vital infrastructure to our health and care system”. “I would rather make a small contribution to ensure that hospices and air ambulances can run than to have to watch people sit in baths of beans to try to ensure that vulnerable people get the help and support they need when they need it,” he commented.

Graham Stuart (Con) disapproved of the Bill and argued that the government could come forward with “sensible tax plans” that do not “particularly disincentivise those who are furthest from the jobs market”. He said that a reduction in the NICs allowance to £5,000 would hurt people who are struggling to get back into work, adding that while £26 billion is the headline amount that will be raised and taken out the economy, 76% of that will in due course come out of wages.

Stuart appealed to Labour MPs to influence ministers by using a personal example from the 2012 Budget. That Budget had proposed 20% VAT on static caravans, but there were fears this would have a negative impact on jobs and industry. People told him: “Change is impossible—this has been announced in a Budget. You cannot overturn a Budget measure.” But instead of campaigning publicly, the MP privately gathered support among Conservative and coalition colleagues and the government were persuaded to adopt a reduced rate of 5%. “If Labour Members can build enough support among colleagues… they have every chance of changing this,” he suggested.

“We in the SNP have consistently highlighted the brutal impact that Labour’s tax rises will have on GPs, charities, care homes and other sectors, with organisations warning that deep cuts will be made to the services they provide—vital services that are no less essential to communities and individuals than secondary care services just because they are received in the community or from a charity. That is why we have tabled amendments 4, 5, 6 and 26 in my name and the names of SNP colleagues”, stated the party’s spokesperson Dave Doogan.

Welsh Lib Dem David Chadwick urged the government to reconsider their decision arguing that health providers and social care services would suffer from the tax rise.

A number of Northern Ireland MPs spoke in the debate. Sammy Wilson (DUP) believed that national insurance increases would ‘impose’ more taxes on small businesses. Rather than asking “who should we tax to pay for the black hole … we should be asking how we can reduce and reprioritise the things that we do”.

Sorcha Eastwood (Alliance) discussed several amendments that she has tabled to the Bill to support people in Northern Ireland: “Amendments 10, 11 and 12 seek to protect Northern Ireland’s healthcare, social care, childcare, hospices, and community and voluntary sectors from the impacts of the proposed rise in employer’s national insurance contributions.”

Robin Swann (UUP), former minister of health in Northern Ireland, said he supported the amendments “that look to alleviate the punishing implementation of, and increases to, employers’ NICs, especially for our family health service and social care providers”.

The only Traditional Unionist Voice MP, Jim Allister, criticised the reduction of the threshold to £5,000 and said within the matrix of tax the reach of national insurance that the change has delivered is truly ‘shocking’. “It is not even tempered, as it could have been, by a phased reduction, so rather than paying 15%, someone could pay a lower amount, such as 5%, if the threshold was reduced to £5,000”.

Iqbal Mohamed (Ind) recognised that the government has inherited a “dire state of affairs”, however he did not support their approach. He suggested that one ‘easy’ measure the government could consider is to impose a 2% wealth tax on assets over £10 million which would raise the amount predicted to be raised by NICs. Another solution could have been closing “corporation tax loopholes that allow corporations to save billions”.

The Exchequer Secretary to the Treasury (XST), James Murray, responded to the debate for the government. He emphasised that the government would provide support for departments and other public sector employers on additional employer NICs costs. However, independent contractors, including primary care providers, social care providers, and charities such as hospices and nurseries will not be supported with the costs.

Murray said that the Department of Health and Social Care will confirm funding for GPs, dentistry and pharmacy for 2025-26 as part of the usual contract process later in the financial year. In relation to adult social care, he argued that the government have provided a real-term increase in core local government spending power of around 3.2% for 2025-26, including £680 million of new grant funding for social care.

The XST suggested that the government’s support for charities via a tax regime is among the most ‘generous’ in the world, with tax reliefs for charities worth just over £6 billion for the year to April 2024.

Responding to Creasy’s new clause, the minister acknowledged that early years providers play an important role in driving economic growth. However, he reiterated the government’s commitment to making childcare more affordable and accessible by opening 3,000 new or expanded nurseries and upgrading space in primary schools to support the expansion of the sector.

Votes

All amendments and new clauses were grouped for a single committee stage debate. Four were pressed to a vote.

Liberal Democrat amendment 1 focused on preserving current NICs rates and thresholds for care providers, GP practices, NHS dentists, pharmacists, charitable providers of health and care, and providers of hospice care. The party’s amendment 23 sought to exempt veterans' salaries from NICs changes.

• Amendment 1 (Lib Dems) – rejected 100 votes to 351
• Amendment 23 (Lib Dems) – rejected 196 votes to 352

A proposed Conservative amendment requested that adult social care, hospice services, primary care, nurseries, and charities continue to pay contributions at the current rates. New clause 1 asked for a review of the impact of the Act on employment, wages, inflation and disposable income.

• Amendment 13 (Conservatives) – rejected 206 votes to 353
• New clause 1 (Conservatives) – rejected 195 votes to 353

Full text of these and other amendments can be read here.

Third reading

Following committee stage there was a very brief third reading debate with just two contributors. The XST told MPs that: “The Bill seeks to put into law one of the toughest decisions we made at the Budget in October… [W]e recognise that there will be impacts on employers as a result of the changes, with employers facing difficult decisions.”.

The Shadow Chancellor, Mel Stride, ended the debate theatrically, saying: “This is not a Bill, but a Shakespearean tragedy. It is the ‘Hamlet’ of our age. While the Labour party was tipping the poison into the ears of the electorate, it was assuring them in its manifesto that it would do nothing with national insurance. Look what it has done.”

The third reading vote passed 354 votes to 202.

The Bill is scheduled to receive for second reading debate in the House of Lords on 6 January 2025.